Contribution funded accounts (CFAs) may be tax-advantaged financial accounts that may be set up through, for example, a cafeteria plan provided by an employer. A cafeteria plan is a reimbursement plan that allows employees to contribute, pre-tax, some of their total income to a designated account. The selected plan may allow an employee to contribute a portion of his pre-tax earnings at the end of each pay period to fund the CFA. The funds within the CFA may be used to pay for qualified expenses as established in the cafeteria plan.
The plan is typically a year-long plan that may be updated and/or annually renewed. As the plan year progresses and contributions from each pay period are added to the CFA, an employee may gain access to an increasing amount of tax-advantaged funds to pay for qualified expenses. However, an employee typically only has access to funds currently stored in the CFA. Therefore, especially towards the beginning of the plan year when funds in the CFA are just starting to accumulate, an employee may not have adequate funds in the CFA to pay for large qualified expenses.
To enable accelerated access to CFAs, a plan manager may provide a linked CFA that links a CFA with a CFA On Demand (CFAOD). The CFAOD may contain funds that reflect future contributions that have yet to be used to fund the CFA. By enabling an employee accelerated access to future contributions, the employee may more likely be able to pay for large qualified expenses starting from the first day of the plan year.
In order to manage a CFA, a plan manager may typically need to manage and reconcile CFAs stored in databases across multiple entities including the employer, bank, and card vendor, plan manager, sponsor, and distributor. With the introduction of the new account type, the CFAOD, new reconciliation processes may be required to manage the CFAs in the databases of the multiple entities. These new reconciliation processes may further introduce synchronization latencies across the multiple entities that may need to be minimized to enable an employee full and uninterrupted access to accelerated CFAs.
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